Vectren Electric & Natural Gas Rate Cases

The following fact sheet was distributed at the OUCC public information meeting and IURC public field hearing on Jan. 8, 2007 in Evansville.

Updated information on this case is available by clicking here.

On September 1, 2006, Southern Indiana Gas & Electric Co. – doing business as Vectren Energy Delivery of Indiana – filed petitions seeking to increase its base distribution rates for electric and natural gas utility service. The utility has filed more than 1,700 pages of testimony and exhibits in these cases.

Vectren’s proposal would increase its annual base electric rate revenues by approximately $135.5 million. This total includes $45.5 million already being collected through customer bills via separate regulatory processes that require state-level review; these costs include environmental compliance, purchased power, and Demand Side Management expenses.

Electric base rates primarily cover infrastructure, operating and maintenance costs, and capital improvements.

• Expenses recovered through base rates are separate from the costs of coal and other electric generating fuels, which are recovered through the utility’s quarterly fuel adjustment clause (FAC) process.
• Under Indiana law, Vectren’s FAC is adjusted quarterly to reflect changes in actual fuel supply costs. Fuel adjustments for all regulated Indiana electric utilities require OUCC review and IURC approval; utilities are allowed to recover fuel costs on a dollar-for-dollar basis but may not profit on those pass-throughs.

Vectren’s proposal would increase the total monthly residential electric bill for an average customer using 1,000 kilowatt hours (kWh) from $99.10 to $121.12.

Vectren’s current base electric rates were approved in 1995. In testimony filed in this case, the utility indicates it is requesting the increase to pay for capital improvements at generating facilities, transmission and distribution line replacements, and other projects, along with increased operating and maintenance costs.

The utility provides electricity to customers in 6 southwestern Indiana counties (Vanderburgh, Gibson, Pike, Posey, Spencer and Warrick).

The OUCC’s “Understanding Electric Rates” brochure offers more information on the components and charges within a typical electric bill.

Vectren is seeking to increase its annual natural gas rate revenues by approximately $10.4 million for service provided in its “South territory.”

Natural gas base rates primarily cover infrastructure, operating and maintenance costs, and capital improvements. These costs – known as distribution charges – are under IURC jurisdiction and are at issue in this case.

Overall, natural gas base rates cover all “non-gas” costs and comprise approximately 20 to 25 percent of a typical residential winter heating bill.

• Expenses recovered through base rates are separate from gas costs, which comprise 70 to 75 percent of a typical residential winter heating bill and are recovered through the utility’s quarterly gas cost adjustment (GCA) process.
• Under Indiana law, Vectren’s GCA is adjusted quarterly to reflect changes in actual wholesale natural gas costs. Gas cost adjustments for all regulated Indiana natural gas utilities require OUCC review and IURC approval; utilities are allowed to recover wholesale gas costs on a dollar-for-dollar basis but may not profit on those pass-throughs. Indiana law also requires natural gas utilities to shop prudently in the wholesale market, with utility purchasing practices subject to state-level review through the GCA process.
• Interstate pipeline transportation costs are regulated by the Federal Energy Regulatory Commission (FERC). Vectren recovers these costs through quarterly GCA proceedings.

Based on data for the 12-month period ending March 31, 2006, a total monthly residential natural gas bill for a Vectren South customer using 100 therms of gas would increase from $127.21 to $132.80 under the utility’s proposal. Over the course of that same 12-month period, the utility’s data show the annual residential natural gas bill for an average customer using a total of 744 therms increasing from $996.54 to $1,062.08.

Vectren South’s current base rates were approved in 2004. In testimony filed in this case, the utility indicates that it is seeking to recover costs of capital improvements to its distribution system along with recovery of federally mandated pipeline safety costs.

The Vectren South service territory includes all or parts of 10 southwestern Indiana counties (Vanderburgh, Daviess, Dubois, Gibson, Knox, Martin, Pike, Posey, Spencer, and Warrick).

Natural gas rates in the Vectren North (or Indiana Gas Company) service territory, which includes counties in central, south-central and southeastern Indiana, are not under consideration in this case and will not be affected by the outcome.

For more details on the specific components of a typical natural gas bill, please read the OUCC’s “Understanding Natural Gas Prices” and “Gas Cost Adjustments” fact sheets.

Evidentiary hearings in both cases were held in December 2006 in Indianapolis, for the purpose of allowing cross-examination of Vectren’s technical witnesses.

A public field hearing in both cases will be held on January 8, 2007 in Evansville. Customers will be able to submit testimony in the form of written or oral comments. The comments will become part of the official evidentiary record to be considered by the IURC in reaching its final decision on the utility’s requests. Consumer comments, whether written or oral, are given equal consideration.

The Indiana Office of Utility Consumer Counselor (OUCC) is the statutory representative for the interests of all utility consumers in these cases and in all proceedings before the IURC.

• The OUCC has not yet taken a position in these cases but is currently scheduled to complete its review and file testimony in the natural gas rate case on January 30, 2007. The OUCC’s testimony in the Vectren electric rate case is due February 26, 2007.

Several of Vectren South’s industrial customers have formally intervened through counsel in these cases and are scheduled to file testimony on the same dates as the OUCC:

• Interveners in the electric rate case include Countrymark Cooperative, Inc., Marathon Petroleum Company LLC, PPG Industries, Inc., Wal-Mart, and Mead Johnson and Company.
• Interveners in the gas rate case include Alcoa, Inc., AK Steel, Mead Johnson and Company.

The IURC has scheduled technical evidentiary hearings in Indianapolis in both cases, to allow for cross-examination of formal witnesses who will file testimony on behalf of the OUCC and intervening parties.

• An evidentiary hearing in the natural gas case is scheduled to begin on March 7, 2007.
• The evidentiary hearing in the electric case is scheduled to begin on April 12, 2007.
• Both hearings will be held in Conference Center Room 32 at the Indiana Government Center – South.
• Evidentiary hearings are open to the public. However, participation is typically limited to the cross-examination of technical witnesses who have filed testimony on behalf of the proceeding’s formal parties.

All filing deadlines and hearing dates in any legal proceeding are subject to change.

A settlement agreement is possible in any legal proceeding; such an agreement would be subject to IURC approval.

Consumers with questions or concerns about this case or other utility issues are encouraged to contact the OUCC’s consumer services staff toll-free at 1-888-441-2494 or through the agency’s Website.

Vectren’s testimony and all other publicly filed documents in both cases are available online by:

• Visiting www.in.gov/iurc,
• Clicking the “Electronic Filing” link,
• Clicking the “Search Cases” link near the upper left corner of the following page, and
• Entering the appropriate docket number on the search page (43111 – Electric; 43112 – Gas).

• State agency
• Represents the interests of all utility consumers and the general public on issues concerning electric, natural gas, water, sewer and telecommunications utilities
• Staff of accountants, engineers, economists, attorneys, consumer services and support personnel
• Participates in regulatory and legal proceedings
• Provides consumers with a voice in utility policy
• Responds to consumer questions and information needs

• State agency
• Regulates many, but not all, Indiana utilities
• Regulates utility rates, financing, service territory, quality, etc.
• Required by law to make decisions that balance the interests of utilities and consumers
• Neutral, fact-finding body
• Authority to investigate utility rates and practices

Public Information Meeting

• Facilitated by the OUCC
• Opportunity for attorney (OUCC) and client (consumers) discussion
• Opportunity for consumers to advise OUCC staff of concerns
• Provides an opportunity for consumers to ask questions and receive information
• Opportunity for consumers to make written comments that can be entered into the official record considered by the IURC in its decision

Public Field Hearing

• Conducted by the IURC
• Formal, legal proceeding presided over by an Administrative Law Judge and recorded by a court reporter
• Often required by law
• Conducted in utility’s service territory
• Allows consumers to make sworn written or oral comments on the utility’s proposal, its service and any other relevant issue
• Not a question and answer/discussion format; designed to allow consumer comment
• Consumers providing oral comments may, at the conclusion of their testimony, be asked questions by the judge, commissioners or an attorney for any formal party to the proceeding
• Comments are part of the official public record considered by the IURC in making its decision

Prepared by the OUCC
115 W. Washington St., Suite 1500 South
Indianapolis, IN 46204-2215
Toll-free 1-888-441-2494
Voice/TDD (317) 232-2494
Fax (317) 232-5923
www.IN.gov/OUCC
uccinfo@oucc.IN.gov